Consumer Protection in the Insurance Industry Hong Kong

Transcription

1 Consumer Protection in the Insurance Industry Hong Kong Ms Annie Choi Commissioner of Insurance Hong Kong SAR Government 8 May 2012 Session Number: (TPS1) 1

2 Overview Hong Kong insurance landscape Consumer protection measures Role of actuaries in enhancing consumer protection 2

3 Hong Kong Key Indicators Population : 7.1 million Areas: 1,104 sq. km GDP per capita (in 2011) : USD 34,281 3

4 Hong Kong Insurance Landscape Authorized Insurers: general 45- long term 20- composite Insurance intermediaries 2,592 corporate 71,540 - individual 4

5 Hong Kong Insurance Market Performance Total gross premium USD 2.8 billion USD 24.2 billion USD 9.8 billion USD 23.7 billion USD 17.6 billion USD 26.3 billion USD 25.3 billion USD 28.9 billion Ranking in Asia : 6 Ranking in the World: 24 5

6 Other Insurance Performance Indicators Insurance density : USD 4,094 Ranking in Asia : 2 Ranking in the World : 14 Insurance penetration : 11.9% Ranking in Asia : 2 Ranking in the World : 5 6

7 General Insurance Business Total gross premium (account for 15% of total insurance business) USD 1.4 billion USD 3.4 billion USD 2.5 billion USD 3.7 billion USD 2.9 billion USD 4.0 billion USD 3.1 billion USD 4.5 billion Average growth rate of 5.9% each year (growth of 10.7% in 2011 over 2010) 7

8 Long Term Insurance Business Total gross premium (account for 85% of total insurance business) USD 1.4 billion USD 20.8 billion USD 7.3 billion USD 20.0 billion USD 14.7 billion USD 22.3 billion USD 22.2 billion USD 24.5 billion Average growth rate of 15.4% each year (growth of 8.7% in 2011 over 2010) 10 million in-force policies (i.e. 1.4 policies per capita or 2.7 policies per working capita) 8

9 Supervisory Regime: Prudential Regulation on Insurers Insurance Companies Ordinance Corporate governance, financial reporting Duty of appointed actuaries Supervisory intervention Internal control 9

10 Supervisory Regime: Market Conduct and Consumer Protection Brokers and agents Self-regulatory system on insurance intermediaries 3 Self-regulatory Organizations (SROs) Registration of intermediaries Issue code of conduct Complaints handling Disciplinary actions 10

11 Supervisory Regime: Market Conduct and Consumer Protection Work closely with SROs to set codes of conducts Insurance intermediaries required to conduct their affairs honestly and fairly Monitor work of SROs Will take over direct regulation of intermediaries in

12 The Insurance Claims Complaints Bureau A self-regulatory body established under the Hong Kong Federation of Insurers Mainly handles disagreement on the interpretation of policy terms Cover individual policies (but not Investment linked policies (ILAS)) No. of complaints handled: 2001: : : : : : :

13 2008 Financial Crisis General Confidence Problems Confidence problem on financial sector and investment products in general Adverse impact on unit-linked products Drop in no. of unit-linked policies th Quarter : 138, rd Quarter : 71, th Quarter : 37,137 (dropped by 48% and 73% as compared with rd Quarter and th Quarter) 13

14 Total Number of Complaints 1996: 160 (approximate) 2007: 1, : 1, : 1, : 1, : 1,408 14

15 Nature of Complaints Cancellation / Non-renewal of policy Delay in Settlement Misrepresentation Amount of Indemnity Repudiation of Liability Loss on Policy Surrender 15

16 Law of Consumer Confidence Confidence + Economy = Business + Complaint Confidence + Economy = Business + Complaint (Based on our experience of 2008/2009) 16

17 How to boost Policyholders Confidence Need to address concerns of policyholders : Whether insurance companies are financially strong and stable? Why their insurance policies cannot be renewed? Whether their claims can be honored? Why can t they surrender their policies? Had the agent / broker lied to them? 17

18 Regulatory Responses Short-to-medium Term: Enhanced consumer protection in the sale of policies Long Term: Financial Dispute Resolution Centre Investor Education Centre Policyholders Protection Fund Independent Insurance Authority Risk Based Capital 18

19 Enhanced Consumer Protection on Sale of Life Insurance Policies Enhanced Financial Needs Analysis information include customers financial income, expenses, assets, liabilities and financial commitments Policy Benefit Illustration for non-investment-linked policies, must explain clearly the guaranteed and non-guaranteed benefits Policy switching need to complete a Customer Protection Declaration (CPD) form. Policyholder can have their premium refunded in case of policy twisting. Cooling off period extension from 14 to 21 days 19

20 Enhanced Consumer Protection for Investment Linked policies (ILAS) Customer Analysis including enhanced financial needs analysis, risk profile questionnaire and post sale telephone confirmation (audio-taped) for vulnerable groups (low income, low education, elderly, capital investment entrants) Expanded Examination syllabus for new intermediaries selling ILAS Enhanced Continuous Professional Development hours requirement for existing intermediaries selling ILAS Product information summary specimen effective from June

21 Enhanced Consumer Protection Pamphlets on Questions you need to ask before buying unit-linked products distributed at the point of sale Prohibition of gifts tied to life products investment-linked products effective from May 2011 Other life products effective from April 2012 Enhanced Consumer Education 21

22 Long term initiatives Need reform to strengthen whole system Will also boost consumer confidence Financial Dispute Resolution Centre ( FDRC ) Investor Education Centre ( IEC ) Policyholders Protection Fund ( PPF ) Independent Insurance Authority ( IIA ) Risk Based Capital ( RBC ) 22

23 Financial Dispute Resolution Centre Expected to be launched in mid 2012 To resolve financial dispute between financial institute and their customers by way of mediation, and, failing that, by arbitration Banks and securities companies will be covered in the existing scheme, will consider including insurance companies at a later stage 23

24 Investor Education Centre Expected to be launched in end 2012 / early 2013 To improve the financial literacy and wealth management capability of the general public, so as to help them to make better informed financial decisions 24

25 Policyholders Protection Fund In addition to current compensation schemes which covered motor and employees compensation, we propose to establish PPF Coverage: 2 separate schemes for life and non-life Targets: individual policyholders and SMEs Funding: progressive funding approach (0.07% of premiums from insurers) Compensation: 100% of first HK$100, % of balance (up to HK$1 million: per policy for life / per claim for non-life) Asset recovery mechanism + Financing arrangement 25

26 Independent Insurance Authority A statutory body rather than a government department Quicker response to new regulatory challenges and crisis situations Better regulation of insurers Better regulation of intermediaries (from existing self-regulatory system to direct licensing) Raise consumer confidence Targeted timeframe : 2013/

27 Risk Based Capital ( RBC ) Existing Insurance Regulatory Regime in HK International trend Challenge Must develop HK s own model meeting HK s unique situation taking into account of world trend and other jurisdictions experience Timeline :Consultancy Study (2012/2013) 27

28 Role of actuaries in enhancing consumer protection ASHK supports initiatives to enhance consumer protection and modernize reserving / solvency regime (e.g. providing professional advice on a more realistic benefit illustration for consumer information, and enhanced stress testing scenarios) Active participation in the development process of PPF, IIA, and RBC projects 28

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